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Chapter 11

Chapter 11-Producing Goods and Services

7 pages60 viewsFall 2008

Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Michael Szlachta
Chapter
11

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Chapter
11: Producing Goods and Services
-
Service operations
are production
activities
that
yield tangible
and
intangible service
products (ie
entertainment, transportation, education
and food preparation)
- goods production is production
activities
that
yield tangible
products
like radios,
tvs, buses, textbooks etc.
What does Production mean today?
- production = the making of
physical
goods, and more
recently,
the term
includes
services
- things that we need/want,
like health
care, are produced from
service
operations
-
service operations
focuses more on
human resources,
not the
equipment
and technology
- success in
service operations
depends on
provider-customer
contact
- the customers
have
to
feel
good about the
service
they receive in
service
operations
THE GROWTH OF GLOBAL
OPERATIONS:
- the factory floors are
still
the most
crucial
part of
manufacturing. however, factories
today seem
cleaner
and
more focused on technology
- production
operations
are more
environmentally
friendly
- firms today face continuous change - new
technologies emerge
for
machines
to run more
efficiently.
Online
machines
are
automatically
connected to the
internet
to adjust their own settings
Creating Value
through production
- products provide
businesses
with economic
results (profits,
wages etc) and non economic
results
(new
innovations,
pollution)
- products provide
consumers
with
utility
= the power of a product to
satisfy
a
human
want
- there are 4 basic kinds of
utility
that are
possible
only
because
of production
-
Time utility
= making a product
available
at a time when
consumers
want
it
- place
utility
= making a product
available
in a
convenient
place
-
ownership (possession) utility
= making a product that
consumers
can take
pleasure
in owning (ie
taking
decorations
to decorate your house)
- form utility = raw
materials
become
finished
good,
satisfies
a
human want
-
all
of the above are
possible because
production
makes
products
available
in the first place
- production has
recently
been
replaced
with
operations because
production doesnt only
refer
to
manufacturing anymore,
it refers to
services
as well
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-
operations (=production)
management = the
systematic
direction and control of the
processes
that
transform resources
into
finished
goods and services
- production
managers
are
ultimately responsible
for
creating utility
for consumers
- production
managers
are
responsible
for
ensuring
that
operations processes
create
value
and provide
benefits.
They
need to bring together raw
materials, equipment
and labour.
They
must
ensure
that as
demand for a good
increases,
they must produce the amount
required
by
scheduling
and
controlling
the
work.
Also,
they need to control costs,
quality levels, inventory,
and plant and equipment
- for
example,
a
farmer
is a production
manager because
a
farmer creates utility
by
converting
raw materials
like (soil
or
seeds)
into outputs
like
milk, heat.
They
make the
decisions
as to what
equipment
to use,
depending
on their costs and if they need workers to
harvest
crops
SEE TABLE
11.1 ON PG 341
FOR TYPES OF PRODUCTION MANAGEMENT
Operations Processes
- this is a set of methods and
technologies
used in the production of a good or
service. This means
that
there are two ways of
classifying
types of production according to
differences
in their
operations
processes
-
technology
and customer contact
- Goods producing processes:
-
transformation technology: different transformation processes
to turn raw
materials
into finished
goods.
IE Chemical processes:
raw
materials
are
chemically altered; Fabrication processes:
raw
materials
are
mechanically
altered through the basic shape or form of the product; Assembly
processes:
put together a good by
assembling different
components
(ie
a
car);
transport
processes:
goods acquire place
utility
by being moved from one location to another; Clerical
processes: transform information IE
doing
inventory
in a
retail
outlet
-
Analytic
vs
synthetic processes:
a way of
classifying
production
processes
by looking at the way in which
resources
are
converted
into
finished
goods.
Analytic
process = process of production in which resources
are broken down into components.
Synthetic
process = process of production in which
resources
are
combined to produce a
finished
product
(ie
combine
different chemicals
to make paint)
-
Service
producing
processes:
a way of
classifying service.
Ask if the
service
could be produced without the
customer being part of the system.
This means
that
services
are
classified
according to their extent of
customer contact:
- high contact: the
service
cannot be provided
unless
the customer is
physically involved
in the
system
(ie
transit system - if the customer isnt there to ride the bus, the
service
isnt being
performed).
This
is why the
managers
must be concerned with the
appearance
of the
service
- to
please
the customers so that they return
- low contact - the customer does not
have
to be
physically
present in order for the
service
to be
performed. For
example
- lawn care
services
- the customer doesnt
have
to be there in order for
the lawn to be
cleaned
by the firm
Service vs
Manufacturing
operations
- both
transform
raw
materials
into
finished
products
-
service
production - the raw
materials
= people choose among
sellers
to
satisfy
their needs.
- the
finished
product in
service operations
= outputs = people with needs met and
possessions
serviced
FOCUS
ON PERFORMANCE:
-
services
are
performed
so customer-oriented
performance
is a key factor in
measuring
the
effectiveness
of
a
service
company
-
service operations
focus on the link between production and
consumption (process
and outcome)
-
services
are
intangible
and
less
storable
-
quality considerations
must be
defined
and managed
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